Logo
Munich Personal RePEc Archive

Monetary Policy and Large Crises in a Financial Accelerator Agent-Based Model

Giri, Federico and Riccetti, Luca and Russo, Alberto and Gallegati, Mauro (2016): Monetary Policy and Large Crises in a Financial Accelerator Agent-Based Model.

[thumbnail of MPRA_paper_70371.pdf]
Preview
PDF
MPRA_paper_70371.pdf

Download (753kB) | Preview

Abstract

An accommodating monetary policy followed by a sudden increase of the short term interest rate often leads to a bubble burst and to an economic slowdown. Two examples are the Great Depression of 1929 and the Great Recession of 2008. Through the implementation of an Agent Based Model with a financial accelerator mechanism we are able to study the relationship between monetary policy and large scale crisis events. The main results can be summarized as follow: a) sudden and sharp increases of the policy rate can generate recessions; b) after a crisis, returning too soon and too quickly to a normal monetary policy regime can generate a "double dip" recession, while c) keeping the short term interest rate anchored to the zero lower bound in the short run can successfully avoid a further slowdown.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.